Why a Sale of TikTok Would Not Be Easy

Legislation that could eventually mandate a sale of TikTok is moving forward. But any kind of divestiture by its Chinese parent company, ByteDance, is likely to prove challenging.

The House on Wednesday approved the bill to ban TikTok unless ByteDance sells the app to a buyer the government signs off on. The bill would still need to pass the Senate and be signed into law by the president. Assuming that happens, however, the options for potential buyers would be extremely limited, a potential spinoff presents many difficulties, and the Chinese government or U.S. regulators could try to block any of those options.

Here’s what to know.

To avoid a ban, ByteDance would have to arrange a sale that guaranteed TikTok was not under the control of a foreign adversary — a group that includes China — within six months. ByteDance could not maintain any relationship with the newly independent app or control over its algorithm, which sends users a scrolling feed of videos catered to their interests.

Under the legislation, the president will need to agree that the sale meets those conditions.

ByteDance and TikTok have not said how they would handle a sale, if it’s required. But legal experts say that in the case of a sale, ByteDance would likely need to decide between selling all of TikTok globally versus trying to cordon off its U.S. business.

ByteDance wouldn’t be allowed to have any connection to TikTok going forward. So it’s unclear if it would even be possible to break off its U.S. operations to comply with the legislation while still allowing that American version of the app to use ByteDance’s algorithm and talk to TikTok users in other countries.

Even just the U.S. portion of TikTok would be expensive, with some analysts estimating it could be worth more than $50 billion.

That is likely to make it too expensive for a competitor like Snap. The tech giants who could afford it, like Google or Microsoft, are likely to run into antitrust concerns about continuing growth.

A group of investors could also team up to raise the money they would need to buy the app.

ByteDance could also pursue an alternate route, like spinning off the app into a stand-alone public company by offering shares on the stock market.

Senator Mark Warner, the Virginia Democrat who chairs the Intelligence Committee and has been supportive of the new legislation, said in an interview that a divestiture could involve a partnership between the United States and its allies.

“It would be great if it was an American company,” he said. “But if it was not an American company, it could be a joint venture between an American company and a European company.”

If the bill becomes law, ByteDance is likely to challenge its legality in U.S. courts. China could also try to block the sale of the app.

Early Wednesday, the Chinese government criticized the legislation even before it was approved by the House, saying that the American government was “resorting to hegemonic moves when one could not succeed in fair competition.” And it’s not the first time Beijing has signaled it might step in. In 2020, when former President Donald J. Trump tried to force ByteDance to sell TikTok, China placed export restrictions on technology that sounded like TikTok’s content recommendation algorithm.

At the time, both Oracle and Walmart seemed to be ready to buy stakes in the company — but the deal never materialized.

Regulators can also make it difficult for a U.S. company to buy TikTok. The European Union and the Biden administration have repeatedly challenged acquisitions by big technology companies like Microsoft, Amazon, Google and Meta, which owns Facebook and Instagram, using antitrust laws.

Yes. During the Trump administration, the government forced a Chinese company to sell the dating app Grindr. Officials were concerned that the app — which includes a field for users to display their H.I.V. status — could expose sensitive information about Americans to China. A group of investors ultimately bought Grindr from its Chinese owner, Beijing Kunlun Tech, for more than $600 million.

But TikTok operates on a much larger scale than Grindr, with 170 million users in the United States alone. If ByteDance is forced to sell the app, it will be a major escalation in a digital cold war between the United States and China over who gets to control critical technology.